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The City of Seattle and Businesses Clash Over Proposed Head Tax

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The City Council of Seattle plans to vote as soon as May 14th on a polarizing tax proposal, which will levy a “headcount” tax on the city’s largest employers. The proposed tax will be levied on businesses doing business in Seattle with greater than $20 million in Seattle taxable revenues. As early as 2019, businesses would be taxed at a rate of $0.26042 per hour per employee working in the city. In 2021, the tax would shift to 0.7% of all payroll related to work performed in Seattle. As the proposal is currently drafted, the tax would also apply to members and partners of LLC and PLLCs. The tax is estimated to increase government collections by approximately $75 million annually and will be used to fund the construction of affordable housing units, provide additional services for the homeless, and pay for related administrative costs.

Many businesses are not in support. The most notable of which is Amazon. Amazon reports halting the construction planning of their Block 18 project in downtown Seattle. Block 18 is reported to add approximately 1 million square feet of new office space that would support nearly 8,000 new jobs as well as spur growth in the surrounding economy. This comes at a time when Amazon has expanded their operations in Boston and Vancouver, B.C. and is narrowing down locations for a second headquarters. The Seattle economy has grown rapidly in the past five years and has been one of the top performers in the nation. Many credit this growth to the expansion of the major businesses in the area, which has allowed the supporting industries to flourish, and in particular the construction industry.

Supporters of the tax hope this will slow housing prices, slow inflation, and help the homeless in the city. Many residents believe they are being priced out of their homes due to the growth in employment at many of the large locally based companies, which pay high wages in a state with no income taxes.

There seems to be a divide between businesses and residents. Seattle City Council must weigh both sides when making their decision as this is a pivotal moment for the residents of Seattle and the local economy.